O’Reilly resigns as Independent’s chief executive

Published Apr 20, 2012


Ann Crotty

After weeks of speculation and mounting tension with the group’s funders, it was announced last night that Gavin O’Reilly, the chief executive of Independent News & Media (INM), which publishes Business Report, has resigned.

O’Reilly’s resignation marks the end of a 30-year period in which the O’Reilly family has dominated the running of the Irish-based media group.

In a dramatic move back in 1994, Gavin’s father, Tony O’Reilly, who headed the company for decades until he resigned in 2009, bought control of the Argus Newspaper Company from Anglo American. He subsequently acquired other media assets from the then SA Associated Newspaper Company to create South Africa’s largest English-speaking print media group.

O’Reilly senior is believed to have had close ties with former president Nelson Mandela. The latest move raises some uncertainty over the ownership of the South African operation.

Gavin O’Reilly will be replaced as chief executive by Vincent Crowley, who is currently the company’s chief operating officer.

While there has been extensive speculation about the growing animosity between O’Reilly and Denis O’Brien, an Irish telecoms billionaire who has built up a 22 percent stake in INM over the past six years, it was unclear last night whether O’Brien had in fact played a decisive role in O’Reilly’s resignation.

One source told Business Report yesterday that the final push came from the company’s banks and bondholders, who became increasingly frustrated by O’Reilly’s failure to decisively address the group’s crippling debt problems.

It also appears that the banks and bondholders were concerned that while there was severe cost pressure exerted on the group’s operations, the head office had not been exposed to cost cutting.

In 2009 the group’s heavily geared position fell victim to the after-effects of the global financial crisis. An excessively generous dividend policy, share buybacks and acquisitions had resulted in huge levels of debt building up on the balance sheet. An extensive restructuring, including a massive rights issue, went only part of the way to addressing the problem.

The rights issue saw the O’Reilly family’s stake whittled down to about 6 percent from just more than 30 percent. O’Brien’s stake, which had been acquired at a cost of about e500 million (about R5 billion) was similarly reduced from about 28 percent. However O’Brien subsequently built his stake back up to 22 percent.

The restructuring also saw many of the group’s funders changing their debt into equity stakes and imposing operational restrictions on management.

Despite the view that it is the banks and bondholders who were behind O’Reilly’s resignation, there has been widespread coverage of the growing tension between O’Reilly and O’Brien and considerable speculation that O’Brien was proposing to oust O’Reilly at the upcoming annual general meeting in June.

The animosity between O’Brien and O’Reilly reflects not only a difference in style between the two but more significantly, O’Brien’s perception that the INM’s Irish-based newspapers have pursued a hostile approach to him and his business ventures. O’Brien was the subject of a high-profile government inquiry into the manner in which he was awarded an extremely valuable cellular licence during the 1990s.

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